Southwestern States Oil & Gas Co. v. Sovereign Resources, Inc.

• Decision Date: 15 February 1963
• Docket Number: No. 16112,16112
• Citation: 365 S.W.2d 417
• Parties: SOUTHWESTERN STATES OIL AND GAS COMPANY, Appellant, v. SOVEREIGN RESOURCES, INC., et al., Appellees.
• Court: Texas Court of Appeals

Page 417

365 S.W.2d 417

SOUTHWESTERN STATES OIL AND GAS COMPANY, Appellant, v. SOVEREIGN RESOURCES, INC., et al., Appellees.

No. 16112.

Court of Civil Appeals of Texas, Dallas.

Feb. 15, 1963.

Rehearing Denied March 15, 1963.

Strasburger, Price, Kelton, Miller & Martin, and Royal H. Brin, Jr., Dallas, for appellant.

Kilgore & Kilgore and Carl Mays, Dallas, and Henry Gossett, Longview, for appellees.

DIXON, Chief Justice.

This is an appeal from a summary judgment.

Appellant Southwestern States Oil and Gas Company, hereinafter called Southwestern, sued appellee Sovereign Resources, Inc., hereinafter called Sovereign, for damages, actual and punitive. The action is for the breach of an alleged written contract known as Exhibit No. 1, dated September 11, 1959; and in the alternative for breach of an alleged written contract known as Exhibit No. 2, dated sometime in November 1959. The two instruments are concerned with the same subject matter, the alleged sale of oil and gas properties by Southwestern to Sovereign.

C. M. Wood and W. C. Curry, officer and director, respectively, of Sovereign, were sued individually on the grounds of wrongful interference with the contract between the two companies.

Part of the consideration for the alleged sale was the transfer to Southwestern of 200,000 shares of stock in Sovereign. Southwestern pled that the stock was valued at $3.00 per share at the date of the contract, $6.00 per share at the time suit was filed, and would be $50.00 per share at the time of trial. Judgment was sought for $9,400,000.00 actual and $1,000,000 punitive damages.

As to Exhibit No. 1 Sovereign defended on the grounds that (1) the instrument shows on its face that it was a mere 'letter of intent', not intended by the parties to be a binding contract, and that the parties contemplated drawing a formal contract at a later date; (2) Exhibit No. 1 is insufficient under the Statute of Frauds, Art. 3995 Vernon's Ann.Civ.St., because the oil and gas leases, which were the subject matter of the alleged contract, are not sufficiently described; and (3) even if Exhibit No. 1 be considered sufficient as a contract, the undisputed evidence shows that it was later abandoned by the parties.

As to Exhibit No. 2 Sovereign defended on the grounds that (1) the instrument was neve signed and the consideration clause is blank; (2) the instrument was never accepted as a contract by Sovereign; and (3) it is insufficient under the Statute of Frauds.

Wood and Curry, the individual defendants, assert the above defenses and in addition claim that they are not liable because they were acting in behalf of Sovereign as officer and director of the corporation.

All defendants filed motions for summary judgments. The motions were sustained. Judgment was accordingly entered that Southwestern take nothing by its suit.

In its first and second points on appeal appellant Southwestern contends that the court erred in sustaining appellee's motions for summary judgment because (1) Exhibit No. 1 shows on its face to be a binding contract; and (2) the pleadings, affidavits and depositions show that there is at least a material disputed fact issue as to whether Exhibit No. 1 was intended as a contract or merely as 'letter of intent.'

Exhibit No. 1 is in the form of a letter from Sovereign to Southwestern. It is true, as Southwestern points out, this letter is signed by C. M. Mood as President of Resources, and bears a written acceptance and approval dated September 11, 1959 signed by George Myer as President of Southwestern. It is true also that in several places in the instrument paragraphs begin with the words 'We agree to * * *' and 'You agree to * * *'. Nevertheless we are unable to agree with appellant that the instrument on its face shows to be a binding contract, or even that a fact question in that regard is presented by the record.

In one place the instrument expressly refers to 'whatever clouds or liabilities are reflected in the final contract.' (Emphasis ours). Appellant says that this reference to a later final contract is not conclusive of the question before us, citing Corbin on Contracts, Sec. 30 Vol. 1, page 83, and 13 Tex.Jur.2d 154. But we cannot ignore a material paragraph in the instrument which we here quote:

'Sovereign is presently in the process of preparing a Registration Statement to be filed with the S.E.C. It is agreed that this Statement shall be filed within forty-five days from date, and approved within ninety days from date of filing. We agree that this Contract shall not be binding and shall have no force and effect until and unless same is approved by the S.E.C. and the stock hereinafter named is fully registered and freely transferable. Stock to be sold without restriction of any kind and approved by the S.E.C. * * *' (Emphasis ours).

The above quoted paragraph of itself, containing as it does a condition precedent, seems to us to negative Southwestern's contention that Exhibit No. 1 shows on its face to have been intended by the parties as a binding contract. Couch v. Stewart, Tex.Civ.App., 200 S.W.2d 642. Any doubt as to the meaning of the instrument is resolved against Southwestern when we consider the quoted paragraph along with other provisions, especially the reference to a later final contract.

It there a fact question as to whether Exhibit No. 1 was intended as a binding contract? In our opinion the correct answer is no. Whether correspondence constitutes a contract or a preliminary negotiation must be determined by the language used and the attending circumstances. And when, as is the case here, the circumstances are undisputed, the question becomes one of law, not of fact. Hegar v. Tucker, Tex.Civ.App., 274 S.W.2d 752, (Syl. 3).

The fact that the parties contemplated a later 'final contract' is in itself some evidence that the parties did not intend Exhibit No. 1 to be their final closing contract. Gilbert v. Texas Co., Tex.Civ.App., 218 S.W.2d 906, 941, (Syl. 4). And such fact coupled with the further fact that all of the essential terms of the contract had not been agreed upon, concludes the question against appellant's contention. Liquids Dispatch Line v. Texas Power & Light Co., Tex.Civ.App., 6 S.W.2d 169; Cranfill, et al. v. Swann Petroleum Co., Tex.Civ.App., 254 S.W. 582; Diamond Mill Co. v. Adams-Childers Co., Tex.Civ.App., 217 S.W. 176; Prince v. Blisard, Tex.Civ.App., 210 S.W. 301; Brillhart v. Beever, Tex.Civ.App. 198 S.W. 973. In our discussion of the next point on appeal we shall develop more fully come of the circumstances to which we refer. Appellant's first and second points are overruled.

In their third point appellant Southwestern asserts that the pleadings, affidavits and depositions show there is a material fact issue as to whether the parties abandoned Exhibit No. 1 as a contract.

We see on merit in the third point. In our opinion the evidence of later negotiations conclusively shows that the parties had ceased to look to Exhibit No. 1 as a basis for their pending business deal. The provision for restration with and approval of the stock by S.E.C. was abandoned on the basis of an opinion by an attorney for Resources that such registration and approval were not necessary; a provision that Southwestern would try to obtain a loan of $80,000 to $120,000 from Republic National Bank proved unsuccessful because the Bank apparently preferred to deal with Sovereign as to any loan on the properties involved; Southwestern proposed a plan whereby Resources would issue 2000 shares of stock as part of a fee to Joe Spradling, a broker, who was trying to negotiate the deal between the parties; Southwestern wanted Resources to assume its notes owing to Mercantile National Bank at Dallas; also to agree that if within 12 months from the closing, Resources filed a registration statement with S.E.C. covering an offering of capital stock, shares issued to Southwestern's stockholders under this proposal would be included; and it was tentatively agreed that Southwestern would be dissolved and the shares in Resources would be issued directly to Southwestern's shareholders, instead of to Southwestern.

All the above and other material changes were included in a proposed form of a formal contract prepared by appellant Southwestern's attorney and forwarded to appellee Resources November 24, 1959. This document is known as Exhibit No. 2. Some, but not all, of these changes had been tentatively agreed to by Resources. Exhibit No. 2 was never signed or accepted by Resources, as we...